Greetings, Joel, and welcome to this conference call in relation to today's announcement that Sandvik is to acquire the metrology software company Metrologic Group. I'm Ann-Sofie Nordh , Head of Investor Relations, and with me here today I have Klas Forsström, President of Sandvik Machining Solutions, and Tomas Eliasson, CFO of Sandvik.
Klas and Tomas will walk you through and introduce you to Metrologic and the rationale in Sandvik Machining Solutions and Metrologic joining forces. After the presentation, we will open up for questions. With that said, Klas and Tomas, please go ahead.
Thank you, Ann-Sofie. Let's move to slide number three. I would like to start to reconnect to our capital markets day during the fall and our final slide at that day, and all that in order to put today's announcement into some sort of perspective.
As we stated there, we aim to move from a world-leading player in the niche industry of metal cutting to a leading solution provider into the wider manufacturing industry and thereby delivering accelerated growth with maintained high profitability and returns. That is what this is all about.
If we flip to next slide, number four, our strategy, the Sandvik Machining Solutions strategy, consists of three different parts. The first and obvious part is, of course, to protect and strengthen Sandvik Machining Solutions' core business and grow in niche areas.
That is done in the same way as always by innovation, market drive, sell-on value, drive productivity to our end users, and then complemented with targeted M&A within round tools and other niche areas. The other two parts are to develop and expand into digital, but also move into additive manufacturing. T his in specific is very much both connected to develop and expand in digital offering and move into adjacent growth metrology.
Flipping to next slide, number five. This is a business slide, but the main intent is this is how we define, the industry define, the manufacturing value chain. As you can see, it consists of many different parts all the way from solution design to component concept, moving into process optimization, machine preparation, and machining, and then output and validation or measurement. In different parts of this chain, different players do exist.
Sandvik and all the different brands that we have within the Sandvik Group are the number one player within the machining area. Metrologic is a very, very key player and the leading provider of agnostic software in the metrology and validation areas. I will talk more about that later on.
If I flip to the other slide, slide number eight, you can see that if we sort this a little bit different, it moves into a circle. Certain parts are early in the stage, and then we have machine preparation. We have our metal machining and output validation. What we can see and what we are very, very sure of, that is digitalization will work as a thread through this value chain.
Our strength within machining, and if I move to the next slide as well, then, and that is number eight, we aim to build a seamless digital thread for manufacturing. Our belief is also that machining is influenced already in design and planning. Certain parts of design and planning are actually influenced: how are you going to produce, how are you going to machine.
So it connects closer to each other. When it comes to verification, it's clear, and as I will talk about later, verification is moving from after machining and after production inline into machining and into production.
Moving to slide number nine, more specifically, if we talk about here then inline machining and verification, our belief and what we see in the industry and what we see in our own production, that is there is a constant move towards inline metrology within machining. It is a matter of constant improvements. It is a matter of integrating the manufacturing chain.
I f you combine the forces on metrology, Metrologic, the company, and Sandvik Machining Solutions and the different PAs and brands here, we see a large possibility of value creation and even more customer benefits moving forward. What is then metrology when I say moving from the measurement rooms into the machines? If you take a look upon number 10, slide number 10, in traditional manufacturing, until recently, we have production lines.
The component is machined in CNC machines with, as an example, and very, very open with Sandvik metal cutting tools. You have then reached a finished product. The finished product and component goes into the metrology area, and you measure it. S ometimes, I mean, you don't see the end result or the fault or the mistake in hours.
That leads to delays or machining to evaluation. It drives slow feedback. It is more scrap. It is less efficiency. If you move into inline metrology, measurement is happening as you machine. W e see two different threads here. One is, of course, to move in the metrology into machining.
The other one, and that is more exciting, and here I think that we have a unique possibility moving forward five, six years ahead, that is when we sensor equip our cutting tools and we connect from our cutting tools directly into the metrology area or directly to the machine a nd it will generate constant and instant feedback on quality, inline corrections, and thereby reduce delay times.
If I move to slide number 11, Sandvik Machining Solutions and our different PAs and brands, we always strive to deliver customer value and productivity a nd that is the reason why we are driving this forward. If you take a look upon integration of machining and verification, there are numerous customer benefits from integrating this. Just to point out four very, very obvious ones, it generates less scrap. It generates fewer recalls, and it generates less rework.
At the end, it generates productivity or efficiency gains very, very much in the same way as Sandvik Machining Solutions, Sandvik Coromant, Walter, and Seco have done for decades. Moving over to slide 12 and thereby leaving the strategic rationale behind the move that they have made and talk more about what is the Metrologic Group.
If I start with Metrologic Group at a glance, it is established in 1980. It is a company that has developed and progressed over many, many years. It is headed up by Bertrand Gilli . It is roughly EUR 43 million in turnover, and it's an EBITDA margin that is accretive to Sandvik Machining Solutions. 160 employees, a global presence, majority in Europe and U.S., and then much smaller in Asia. That, of course, is a great opportunity for us because our footprint in Asia into the manufacturing world is very, very strong.
Metrologic is a leader in agnostic metrology software, i.e., it offers software for all the different metrology machines that are available. This is another trend that we see is coming here. Another one that is it's well- positioned among key manufacturing trends with promising product roadmaps. One area for future, that is the i-Robot, a new software setup that can control a robot and a measurement tool as well.
As you can see, the customer segments that Metrologic is covering is very much the similar or same customer segments that Sandvik Machining Solutions are covering. Then, of course, the Sandvik Machining Solutions' customer base is much, much larger. We talk about several 100,000 customers over the globe, and that is generating a great benefit here. What about the product then? They have three different main product lines, Metrolog X4. It's an online setup.
It's a measuring machine device that is connecting, steering, measuring live data, and generates analysis and reports. It generates a lot of different benefits, but among others, it reduces the complexity and simplifies cross-site comparisons. As you know, in large companies, you would like to compare the different sites. Many, many companies nowadays, they have different systems, different setups, and it's impossible to benchmark among each other. This is what comes from this.
Another one that is offline, Silma X4, is programming, planning, and simulation optimization. Here, Metrologic has put together 550 virtual machines available, i.e., it's open to most, if not all, measurement machines in the marketplace. T hen very, very exciting, as I mentioned earlier, Metrolog X4 i-Robot, an inline-in-machine software that can manage robot-assisted measurements. It simplifies the way you handle a robot and a measurement setup and delivers a lot of customer values.
You may wonder, what is then agnostic metrology, and what is an agnostic metrology software? This on slide number 15 is, I think, a very, very simplistic way of describing it, that in many cases, traditional, it is a certain brand and a certain software, and that is only working back and forth. Many, many customers have different machine setups. They have different brands and so on.
So there is a huge desire in the marketplace to be able to operate different types of brands when it comes to measuring machines with one type of software system. A s you can see, Metrologic can operate pretty much all the different brands on the market, and that is one of the value attributes that we have.
If I move a little bit further into the rationale behind this, as I talked about earlier, we see this closed loop when it comes to preparation, design, preparation, machining, and verification. But to be a little bit more specific then, we look upon Metrologic as a perfect strategic fit. It is a premium player with a strong brand name and a high customer loyalty. It is the clear leader in agnostic metrology software. It has, and it offers a strong customer overlap with a broad customer base in automotive and aerospace. They complement each other very well.
It delivers key competence in integration and connection of shop floor systems. We operate very much on the shop floor, so do they. T hen finally, it offers a strong software development resources and capability for the rest of the Sandvik Machining Solutions business area.
All in all, it's complementary to Sandvik Machining Solutions' core offering, and it's enabled us to reach our long-term vision within digital. If I move to slide number 18, we believe in running and operating business close to the knowledge, close to the customer, a decentralized setup. With the acquisition of Metrologic, we will create a new product area.
The product area will encompass a competence center, the Center of Digital Excellence that has started to build up during the last few months, 30 experts and more to be employed. But then we will operate it in an independent setup of business unit. Already existing business unit is TDM Systems, and then Metrologic will fit in a nd as we expand further into this, of course, we aim to also add other business units here. CODE will not only support those business units.
CODE will also support the core PAs because, as I said earlier, the Sandvik Coromant, the Walter, and the Seco, they are also operating in a more digital world very, very close to machining. When you acquire a company and now I move to slide number 19, balancing Sandvik Machining Solutions' integration with a strong independence, of course, there are several value creation drivers in this.
We are very clear, and we have a high belief in our strong setup of productivity centers a nd the productivity centers, and we have about 40 different centers around the globe, they will be a lead generator and to showcase solutions in this field. Then, of course, there is also a possibility moving forward of leveraging Sandvik Machining Solutions' key account sales force for lead generation.
O f course, also moving in the competence, not only in Metrologic offerings but also in other offerings like robots, but who knows, also most probably into CNC programming using those resources. With that said, as I said earlier, we truly believe in an autonomous, very close-to-business operated setup.
So we need to protect the very, very good core of Metrologic in order to continue to develop high-quality software, continue to secure high customer involvement to drive satisfaction, and then, of course, ensure it's secure, the already number one position, and that number one position in agnostic is kept also moving forward.
With that background about the strategy, the rationale, and what is Metrologic, I would like to move over to my colleague Tomas Eliasson to talk a little bit about the transaction overview and financial impact.
Thank you very much, Klas. I'm very happy to do that, the transaction structure, and then a few words on the financial impact. So if we move to slide 21, the enterprise value of this transaction is EUR 360 million. The seller is a European private equity company, Astorg. This is a 100% cash deal, and we expect the deal to close somewhere mid-2018 after works council consultation and customer regulatory approvals.
There are synergies, of course, in customer base, in sales force, and in productivity centers, as Klas has mentioned here. It is margin accretive to Sandvik Machining Solutions, and the earnings per share impact is neutral to slightly accretive already from start. If we dig a little bit deeper into the financial impacts on the group, just to repeat, it will be neutral to slightly accretive on earnings per share and accretive to the margin. Of course, the return will be slightly negative.
There will be some dilution, but really not very much. If we look at the net gearing and the net debt to EBITDA, it will be a limited impact. On the right-hand side on the slide, you can see net debt before and after. You can see the net gearing, which is 0.27. By March 31st this year, it will go to 0.34. So a very, very really limited impact.
We were on 1.1, not more than 24 months ago. Now, this performing balance sheet or performing net gearing is sort of before we receive the proceeds from the Hyperion divestment. A s we close the Hyperion divestment in a few months, we will get SEK 4 billion back in proceeds. So the balance sheet will sort of bounce back to where we are right now.
As you can see in the release or reading the release, and as you can see here on the slides, we don't disclose the exact EBITDA margin, but this is a profitable company. It's a healthy company, cash accretive a nd the EBITDA multiple on this transaction is in the teens. And with that, I'll like to hand over again to Klas for a summary.
So moving over to slide 24 before we reach into the Q&A session then, this is the first step into metrology. It is a well-setup, decisive expansion into digital manufacturing. It's the first step on a journey that I really, really look forward to. It has a strong strategic fit. We see benefits from both sides. It generates clear growth synergies in various ways a nd as I said earlier, it's a first very important step in towards digital manufacturing.
Really, what we have been saying for many, many years, we are not only selling inserts. We are selling knowledge. We are selling the competence in how you produce and how you machine. N ow we're expanding that thinking and that way of looking on the market. With that, I move over to slide 25 and thereby also open up for Q&As.
Thank you. If you do have an audio question for the speakers, please press zero one on your telephone keypad, and you will enter a queue. After you are announced, please ask your question a nd our first question comes from the line of Peder Frölén from Handelsbanken Capital Markets. Please go ahead. Your line is open.
Thank you, and thank you for taking my questions. To begin with, to try to understand the potential in sales synergies here, could you please help us to understand the setup of the company? I mean, the sales force size, how they go to market, distributors, key account, and so forth.
Could you also explain a bit about the size here b ecause if I look at PPM in Hexagon, there's typically like 15x the size, t his company is said to be the leader. How should we look upon this? Could you maybe explain in what part they are sort of leading?
Thank you very much for the question. I try to answer the handful of questions step by step here then. I f I start with how to position this company, I think it operates in a very clear niche a nd the clear niche is agnostic software aimed for metrology. T his is a niche that is a little bit difficult to really design and describe how it is, but it's a growing niche when it comes to providing agnostic hardware, neutral software moving into all different hardwares within the metrology area.
They go to market very, very much like Sandvik Machining Solutions. They use to some extent distributors. They work together with OEMs to some extent, but they definitely also are selling direct to the end users a nd that is also something that we see as a very strong culture fit with how we operate.
We are very, very close to the machine floor, and we believe in operating close to the end user. Then when I look upon synergies, I talked about the possible synergies in general terms, i.e., not to start for Sandvik Coromant to sell those type of products immediately. It is more to be a gate to open up new possibilities for this company.
They are very strong, 54% of the turnover in Europe. They are in the 20s% when it comes to North America and fairly weak when it comes to Asia a nd we are extremely strong in the Asian manufacturing footprint.
So there we believe together with us, independently, and also together with some of our distributors, they can gain a lot of energy there, so to speak, and momentum. Then when it comes to let me see. I think I answered three or four of the questions, and then I had two more perhaps. If you could repeat those then. My name will come to be shorter.
What I'm trying to understand is, so try to quantify the synergies. Very clear to explain them in general terms as you mentioned. But given your sort of vast, larger reach in SMS, what type of market share do you think this company has within the agnostic metrology as they define the market today, so to speak?
H ere it is, we are fairly sensitive in talking about the market shares that we have within Sandvik Machining Solutions and Sandvik in general terms. I can only say like this, and that I'm very confident in. In that niche, in that market, they're declared number one, not only when it comes to size, but also when it comes to and that is even more important, mind share, customer satisfaction, appreciation.
Okay. Thank you so much. I get back in line.
Thank you. Our next question comes from the line of Klas Bergelind from Citi. Please go ahead. Your line is open.
Yes. Hi guys. It's Klas from Citi. I want to come back on the synergies. Seems to be more tilted to growth rather than cost. If you could confirm that first a nd if it's possible in any way to say what the sales ambition is. It's obviously a small base to grow from, but growth is not that strong currently.
Seems to be 3%-5% versus others in the space growing more than 10% when you look at industrial software. Where can growth go to o r put differently, how much market shares can the yellow coats take here? Seems to be openings in Asia on your geography, but this is obviously a global ambition.
If you talk about growth, I mean, they have a very, very strong business model that goes either to new equipment and new installations or also into upgrading existing base then of measurement machines. Instead of talking about their growth opportunities, I would like to say that the market as such, it is in the mid-single-digit to high single-digit range. We are very confident that that can be accelerated from our side.
Also, I think it's important. We believe that they have a strong fit into the marketplace. We believe that with our strength, we can provide to them a larger sales force, secure larger investments in their way to go to market, and support them with our market presence. It's not that our yellow coats from day one will start to sell this type of setup.
As we progress, I'm pretty sure that in a few years, that will also start to happen. I think that when it comes to innovation as well, they are a very innovative company. The i-Robots, as an example, is also showing good new visions of how you can close certain elements within the manufacturing chain, in this case, in between how to maneuver a robot and how to maneuver measurement equipment. Moving forward, I'm pretty sure that we can also start to find similar setups in the CNC programming in our way to drive how to produce a component.
Okay. My second one is one for perhaps Tomas. Also thinking about the growth, whether it's a roll-up strategy and M&A, this is obviously the first step. How many Metrologic Groups do we have out there?
Thinking about your experience, Tomas, from ASSA ABLOY, is it easy to do roll-ups o r will you buy competitors to Metrologic? Do we need to move outside of this area, CAD/CAM 3D printing? You talk about this being a niche, however, but it's neat to understand the scope. How many more can we see?
Well, I can just say that I mean, yes, we see this as the first step, right? But I think I'll then hand over the word to Klas to talk about the future.
I go back to thank you for the question. I go back to the circle that I described. We look upon connecting the different parts of this circle, already from design to pre-machining within machining and then also now verification. We have a good pipeline of possible acquisition targets, not only in this area but also in other areas.
But as you know, it's one thing to have a pipeline. It's another thing to really get together to see that it fits and so on. But I can tell you that this is the first step, and I'm really looking forward to coming steps. But that we will communicate when day arises.
Okay. One final quick follow-up. Another one on robotics is a new area for Sandvik in this sense. What kind of market shares do we see Metrologic have here? Are they big in this field, or is this a very fragmented market when you think about their niche?
Here, I need to say like this. I think the i-Robot that you talk about is an example of the strong, strong competence that they have within the range of software and metrology a nd it's not too many companies that can operate both a robot and a measurement setup. T his type of connection in between two different fields, that is the knowledge and the competence that Metrologic do have. I go back once again, I think, what a fantastic opportunity, and we have already projects ongoing when it comes to CNC programming and similar type of ideas.
Thank you.
Thank you. Our next question comes from the line of Lars Brorson from Barclays. Please go ahead. Your line is open.
Hi. Good morning, Klas, Tomas, Anders, or good afternoon, rather. A couple of quick ones for Tomas. Tomas, I heard you say EBITDA multiples in the teens. Can I just confirm that that's based on historical numbers? I make that an EBITDA margin in the 40s. In that case, that's question number one, please.
It's right now.
Right. Secondly, Tomas, can you talk a little bit about the deal structure? Is there an earnout? I f so, for how long does that run over? A lso, can you talk a little bit about for how long Metrologic's management team is committed to staying in the business?
Can you talk about the management team, Klas, please?
Absolutely. The management team is very, very pleased with the setup that we have provided, and I'm very confident that they are full steam ahead. They look forward to solve industrial and production problems together within the Sandvik Machining setup. The packages that we have put together, I think they are happy about them. That is what I hear.
Yeah. W hen it comes to the seller, no, it's no earnout with the seller. It's all upfront.
Thanks. J ust on return on capital, I note slightly negative. Can you help me a little bit with, as you look a little further out, how I should think about value creation from a return on capital standpoint?
Eventually, in our plans, this will contribute, but it'll take a few years. Initially, there will be a dilution, but we talk about less than one percentage unit.
Understood. Thanks, guys.
Thank you. Our next question comes from the line of Alexander Virgo from Bank of America Merrill Lynch. Please go ahead. Your line is open.
Thanks very much. Good afternoon. Quick one then. I guess just trying to understand how customers look to use this software. I guess really where I'm coming from here is the competitive dynamics. What exactly is it that Metrologic and agnostic software offers that the existing or incumbent providers would not?
So if I think of ZEISS or Hexagon or FARO, the names you've got there on the slide, is it purely just being able to go across all three different platforms a nd in which case, how much I suppose going back to your point on market growth and potential? I know the business has been around since the early 1980s, and we're looking at EUR 45-odd million of revenue. I'm not belittling that at all, but it does seem like it hasn't grown an awful lot over that time period.
Whereas if I think of PPM as an example and notwithstanding M&A, it's probably doubled in size and is close on or north of EUR 400 million. So just trying to get a feel for potential growth and competitive dynamics. Thank you.
Thank you for the question. The first question is, what is agnostic, and what value do they provide to the customer base? If I divide it into at least two, maybe three different areas, the first one that we talked about, that is this capability, possibility in comparison different sites.
Different sites could be built up by different brands of measurement machines. The other part that is connected to that, that is also that there is a clear trend that customers would not like to be locked in. This is a drive from customers.
If you acquire a certain machine and then you have to use the same type of software, and that software by itself is not the most accurate and the best performing software, there is a trend, a clear desire from many customers to have an independent software that is actually better in design, more modern, more efficient, and can be utilized on all the different type of machines they have.
The third area, that is, if you go into the measurement space, the hardware, the parts of the machine, to describe it in that way, they have a lifespan of a decade and sometimes more. But a software, it has a lifespan of a much, much shorter time a nd i.e., just by retrofitting, upgrading, let's say, by look on modern machines, suddenly you have a Porsche in the shape of a Volvo. No other comparisons, so to speak.
Thank you. Our next question comes from the line of Peder Frölén from Handelsbanken Capital Markets. Please go ahead. Your line is open.
Yeah. Hi again. Sorry. Could you please repeat the answers on the EBITDA and the dilution? I missed that. Sorry. C ould you also please, Tomas, add anything? You said it was a cash-and-revenue-generating company. Could you tell us anything of the magnitude in a free cash flow yield or whatever? Thanks.
Well, I can repeat the two first answers. We said that the EBITDA multiple is in the teens. Then when it comes to return dilution, I mean, immediately, now, pro forma, it's less than 1 percentage points for the group.
On capital? You mean on capital employed?
Yes, exactly. But eventually, we expect this transaction to lead to an accretion on the return on capital employed. But it will take a few years.
Yeah. Okay. Perfect. Thanks. O n cash then, it's a yield of a couple of percent then, or?
We don't want to venture into that.
Okay. Okay. Thanks.
Thank you.
Thank you. Our next question comes from the line of Magnus Kruber from UBS. Please go ahead. Your line is open.
Hi, Magnus with UBS here. A couple from my end. So how large proportion or percent of metrology equipment sold globally is sold with agnostic software o r how large proportion of the installed base has agnostic software installed?
Today, it's very difficult to say and state an exact number. What I can say, that is, it's a heavily accelerating demand for this. Coming back earlier to a question about the size of the company, I think part of the reasoning why it has not grown substantially earlier is it is now that their technology, their vision, and so on is actually also sought after in the marketplace.
I think without doing any other comparison, if you go into other type of industries, there is a general trend for more agnostic type of software, i.e., not being dependent to one provider, etc.
Okay. Could you say something about the relative size of the three business areas within the company that you discussed earlier and give some color on the relative margins between the three?
When it comes to the size, i-Robot is in the startup, and the predominant one is the two first ones a nd when it comes to margins, no.
Got it. Thank you so much.
Thank you. Our next question comes from the line of Sebastian Kuenne from Redburn. Please go ahead. Your line is open.
Hi. Good afternoon. I have three questions. The first one is to complete your circle, the future machining. Will you need only software, or do you need at some stage to add hardware to complete this circle? That's the first question.
It's a very, very good question. What we have already now, that is, we are literally in the hardware business, i.e., we are selling equipment, we are selling solutions, and we are selling productivity-boosting inserts to the manufacturing space. When it comes to this, I think it is too early to say if we will venture into more hardware-connected or not. I keep both doors open.
Okay. The other question is, when this business was listed, the EBIT margin was 40%-45%. Has it changed materially since then? R elated to that, if we take the 2011 numbers, it looks like the top-line cost per annum was about 7% per annum. Is it mostly organic, or has there been any accretion in those numbers? Thank you.
No comments, really, on the margins. I mean, it's Tomas, perhaps.
No, no. We don't want to discuss details on that today.
T hen very, very briefly, the company as such, they have done in the past a small investment or acquisitions in North America. But besides that, everything is organic growth, and it has accelerated the organic growth.
Okay. Thank you.
Thank you. Ladies and gentlemen, before going on to the next question, I would like to remind all participants to please press zero one if you do wish to ask a question. Our next question comes from the line of Andreas Koski from Nordea. Please go ahead. Your line is open.
Thank you, and good afternoon. I would like to come back to the market side. So this company has revenues of almost SEK 500 million, and you're saying it is a clear leader in its niches, implying a market value of significantly less than SEK 5 billion. But I just want to understand if this niche or technology is part of a larger market where this niche can grab a larger share of the total market, or is it this market that we have to deal with, the fairly small market of maybe SEK 2- SEK 3 billion?
I think without commenting on the market as such because it's, and please, do you understand me right when I make this comparison? I use it as an example. But when you're moving in and open up a market, let's say iPhone, and the market do not exist, I mean, then you grow the market by yourself.
M y view on looking on agnostic software in the metrology area, without any other comparisons to what I used as an example, is a market that itself will develop and grow. So it's very difficult to say, "This is the market size now, and that is the market size tomorrow." I think there is a high demand in the marketplace to grow itself.
Okay. But are we going to see customers moving from, I don't know, a closed architecture to an open architecture, which this is, or how?
That is what we see. Then at the end, it's very much up to the customer to decide. That is what we see in our customer base. That is what we hear. That is what we pick up. Yes.
Yeah. So then it is part of a significantly larger market if we include the closed architecture, so to say. Yeah, a nd the growth rate of mid- to high single-digit numbers that you were talking about, is that for this niche, or is it for the total metrology market?
Also difficult to say. I think it is similar a nd if you analyze the metrology market, you can see larger players covering a large field. I think it's for both.
Okay. T hen looking on the slide on the different market segments in the area, now you enter metrology or what you call here output validation. Do you feel with this acquisition that you have enough in output validation, or should we expect more acquisitions there? Al so looking at the other market segments, where would you like to do acquisitions? Is it only in machining preparation, or could we see acquisitions also in process optimization, process definitions, and the other?
I think the very, very honest answer is it depends upon how well we can connect the different eventual targets with our vision, i.e., it needs to be a clear link to our belief and what we see that is more and more decisions are either taken close to the machining area where we are the number one player in the field, or they are influenced by decisions taken to others.
If we can connect them very well, and I think there is a high probability, then the answer is yes, it may appear in all different areas. What is clear, that is, we see a clear connection in verification and evaluation. But we are part of the industry ourselves . That is one of my expressions that I truly believe in, i.e., we see in our own production, and we operate exactly identical production as our own customers.
We see that this loop is closed, and we see efficiency gains in our production. You know what type of result we are generating. Of course, that is also driven by our efficiency in our production.
The short summary of that answer would be that we could see acquisitions anywhere in all those segments and also in output validation.
It depends if the target is well-suited. Yes.
Yeah. Okay. Lastly, and this is not really related to the announcement today, but as we don't have the opportunity to speak to you many times a year, I take the opportunity to ask what you're currently seeing in additive manufacturing a nd if you're worried that additive manufacturing will start to grab a meaningful share of the subtractive manufacturing market already in the next couple of years, what's your view on that?
I can, yes, add that to you. Then I think we stay on the purpose of this meeting. But I see more excitement in additive manufacturing than I see threats, a nd what I mean with that, that is there is a lot of new potential in finishing, round tools, high-speed machining connected to additive manufacturing. I only see opportunities. O nce again, I add this. We are part of the industry reserve. I mean, we have started to use additive manufacturing in our own production already now. So I see opportunity.
Great. Thank you very much, and have a good weekend.
Thank you.
Okay. Maybe if I maybe should, let's say, from a financial strategic point of view, just would try to summarize a little bit here. I mean, every transaction, of course, has to stand on its own legs, every divestment, every acquisition, etc., etc. But if we take a step back and look a little bit on what we have done over the last two years here, we set out to do a portfolio overview.
We decided which businesses were not core anymore, and we decided that we should sell them. We decided that the balance sheet needs to strengthen, etc., etc. But the reason we did that was that we wanted to create space in the balance sheet.
We wanted to create firepower in order to acquire and invest in businesses which are stable and profitable and that need to grow. So it's really in that perspective, you should see this acquisition. What you're seeing today is an important part of this. Right. Klas, anything you want to add there?
No, thank you for that summary. I'm very, very grateful to the strategy that is within the Sandvik Group that enables Sandvik Machining Solutions to maintain and drive the strategy and the view that we see on the business. This, once again, is the first step in a continued journey to come.
W ith that, thank you very much, everybody, for calling in and for your questions. W ith that, we say have a nice weekend and hope to see you soon.